Tuesday, June 30, 2009

Hotel competition obviously knows no bounds when you consider the Starwood-Hilton litigation and Starwood's allegations that former employees made off with proprietary information, which Hilton used to develop its now-in-limbo Denizen brand.

But, now comes word from Travel Weekly's Caribbean editor, Gay Nagle Myers, about another court case that, if the allegations are true, shows that the level of hotel competition has descended into the pits.

In this caper, winding its way through the Jamaican courts, a resort developer in Coral Spring, Jamaica, alleges that a mining operator stole "500 truckloads of prime white sand," valued at $70 million, and that this payload of granular booty ended up on the beaches of three local resorts.

The sand whodunit conjures visions of tourists lounging on the beaches of the three resorts, Red Stripe beers in hand, only to have their vacations interrupted as teams of investigators break out their forensic kits to scoop up samples of the "prime white sand" to ascertain its origins.

It all makes me feel that the "sand-heist trial" in Jamaica could make the Starwood-Hilton battle look like a day at the beach.

Thursday, June 25, 2009

United Airlines' decision to test the waters and have some travel agencies foot the fees for credit-card transactions when selling United flights could conceivably tilt the airline-online travel agency marketshare-skirmish back toward the airlines.

As Tom Botts noted in the Hudson Crossing Travel Industry Insight Blog: "If adopted even more broadly and applied to the Online Travel Agencies, they would be forced to reinstate some sort of booking fee in order to cover the costs of paying credit card merchant fees. This would return a pricing advantage to the airline.com websites that has recently been removed by all of the major players in an attempt (which we have heard has been successful) to drive growth."

In fact, PhoCusWright financial analyst Jake Fuller, in his recent report, Does the Model Work Without Fees?, cited "indications of a mid-teens increase in air-transaction volume since waiving fees [in March and April] suggests a rise in [OTA] share to 37% and that OTAs would be able to offset at least some of the lost fees through volume."

Fuller pegged the OTAs' share of online-flight bookings at 32 percent in 2008, down from a peak share of 44 percent in 2002.

So if a bunch of major carriers follow United's lead on credit-card fee avoidance and the OTAs are forced to reinstate some form of consumer-booking fee to shoulder the new burden, then the increased volumes that the OTAs have seen in the last few months may evaporate as some consumers return to airline websites for flight-booking.

And, as Nadine Godwin notes in her Travel Weekly piece, United's initiative could drive more travel agent bookings to United.com, as well.

Godwin writes: "Alternatively [instead of agents absorbing the fees and booking United flights using their own merchant acounts], it could push agencies to book at the carrier's website rather than the GDSs, leaving United to pay credit card merchant fees but bypass GDS fees."

Travel organizations quickly are taking sides on the issue.

ASTA (American Society of Travel) has taken a dim view of the United plan and reportedly stated that it would be asking the Justice Dept. to monitor possible airline collusion on the issue since carriers have openly aired their feelings on the question of reducing credit-card fees for some time.

And Robert Joselyn, a prominent travel industry consultant, reportedly is urging travel agents to book carriers other than United as a form of protest to convince the airline to rescind its new credit-card policy.

After greatly reducing their GDS fees several years ago, many airlines identified credit-card fees as the next battleground in the drive to reduce distribution costs -- but United's is the first potentially game-changing attempt.

In a July 2007 Travel Weekly article, Al Lenza, then Northwest's vice president of distribution and e-commerce, said credit card fees were soaring and it was critical for Northwest to trim its "dependence on credit cards."

Lenza was the point man in Northwest's ill-fated drive in 2004 to have agents pay a "shared GDS fee" in an attempt to reduce Northwest's distribution costs. After vehement protest by travel agencies and the GDSs, Northwest withdrew the plan.

Lenza left Northwest in 2008 when it merged with Delta, and The Beat reported in February that he began working at United on distribution strategy.

Adding further documentation to the debate, the Chris Elliott blog even found a hotelier and a former restaurateur who bear witness to the alleged manipulation of their TripAdvisor rankings.

So I have revisited the question and have totally abandoned my former advice that consumers would be prudent to consult hotel reviews from an array of sources, including fellow consumers, journalists, guide books and professional-ratings services.

My new mantra? If you want to figure out if a hotel is worth staying at, then trust me only!

I look at it this way: I have impeccable taste (according to me) and my situation is consistent with the demographics of virtually every traveler.

After all, I am a male; single; divorced (therefore formerly married); I have kids; at one juncture I didn't have kids; I once was in my 20s; my parents are grandparents (so I know their travel issues); I know women who have executed fantastic girls' getaways; I have heterosexual and gay friends; and I have lived in Connecticut, New York, New Jersey, Massachusetts, Israel and Germany.

I drove a yellow cab in New York City so I know the hotel space from that angle, as well.

In the 1980s, I worked as a nachtportier at the Palace Hotel in Berlin and therefore, coupled with my journalism experience, I am an expert reviewer on all matters regarding lodging.

So, obviously, TripAdvisor's user-generated content has absolutely no worth even though there may be dozens or even hundreds of reviews about a property to balance questionable reviews, and despite the fact that even some of TripAdvisor's critics concede they often consult its reviews before stepping out.

Guidebooks? Forget about them. They add nothing.

Ratings services? They all have axes to grind and little information.

Oyster.com and its review by journalists? Not even worth a look because the scribes are paid experts and probably have crazy deadlines.

So, before you take a trip, if you want to find out if the hotel you plan on booking is a flea trap or a five-star wonder, my advice is to look at things in a totally one-sided manner.

Friday, June 19, 2009

The Radisson Fort Worth-Fossil Creek, and reportedly a few dozen other hotels, are in the line of fire, having received a dreaded e-mail from the TripAdvisor Content Integrity team.

The result? In scarlet letters, TripAdvisor posted a warning next to the hotel's display advising consumers that the property, or people associated it, may have tried to manipulate its TripAdvisor Popularity Index.

Here's the e-mail that the TripAdvisor Content Integrity team sent to the hotel.

"To Whom It May Concern,

Evidence has come to our attention which establishes that you and / or others in your organization have submitted material with intent to manipulate your listing and position on TripAdvisor by submitting positive reviews of your own property. This is official notification that your property is now being actively monitored by TripAdvisor for suspicious activity on our website.

TripAdvisor serves as an important source of travel information, which users rely on to be the unbiased opinions of travelers. The reliability of our content is integral to our business. TripAdvisor takes attempts to undermine the integrity of our content very seriously, and in turn, have a procedure in place for penalizing businesses who choose to make such attempts. Please discontinue any attempts to subvert our system immediately.

We ask that you respond to this email to acknowledge receipt of this notice.

Thank you.xxxx [name deleted]TripAdvisor Support Team"

Here is the hotel's reply, from the rooms division director:

"To WHOM IT MAY CONCERN,

I am very sorry about this misleading information, I only respond to the reviews that come on the website. We have been advising our guests to enter your site and make a review, either negative or positive. We would like feedback regardless if it is positive or negative to fine-tune the property. I will also keep an observation here and make sure this doesn't happen on property. Thank you for your concerns and information that you have provided for us to be aware of.

Thank you,

xxxx [name deleted]

Rooms Division Director

Radisson Fort Worth - Fossil Creek

2540 Meacham Boulevard

Fort Worth, Texas 76106"

And, the hotel's general manager, David Michel, told me: "We did start soliciting our guests to visit and comment on TripAdvisor, unaware that it was not acceptable. We will discontinue this practice."

"We are unaware of any attempts by anyone at the property to submit reviews on our own property," Michel said. "Hope this clarifies our position."

Actually, TripAdvisor is OK with properties soliciting guest reviews as long as the hotels don't advocate for positive reviews, don't incent their guests to write glowing reviews, and don't pressure them to remove negative reviews.

The Elliott blog had a nice interiew today with TripAdvisor founder and CEO Steve Kaufer in which he defends the practice of maintaining these warning notices alongside allegedly offending hotels instead of just removing the entire listing.

Kaufer said: "We’ve been posting the warnings since 2006. We view our red badge and rating drop as the best punishment for properties trying to manipulate the system. A couple of people have asked why we don’t drop these properties from the site entirely. We think the red badge is a better punishment, and provides more information to travelers so they can make the most educated and informed decisions before they book. We also wouldn’t want hotels with very poor traveler reviews to use such a banning on the site as a loophole to get out. That’s exactly what poorly run properties want — to be taken off TripAdvisor."

I'm not totally convinced about the policy to retain the display of offending properties, but I see Kaufer's point.

At any rate, all of the guff that TripAdvisor has taken over the last couple of weeks, with the argument that its manipulation notices finally amount to an admission that TripAdvisor is a sham, is misguided.

Instead, give TripAdvisor credit for going after the bad guys and having its Content Integrity folks flag hoteliers who may play fast and loose with the rules.

When the microphones and tape recorders are switched off, what are travel industry insiders saying about the protracted hotel-tax battle that municipalities and the online travel agencies are waging in court rooms and tax assessors’ offices across the country?

Someone, whom I shall call "Industry Pundit" to protect the innocent, exchanged some e-mails with me after I let him know that Expedia began remitting taxes on the retail rate for merchant-hotel bookings in Columbus, Ga., to comply with a court order. And, of course, news of that development leaked out after the Georgia Supreme Court gave Expedia a bashing.

Industry Pundit: But didn't Expedia just move to retail (GDS) rates in Columbus rather than pay taxes on the full consumer rate that was still sold on a merchant basis? I'm not at/near a computer so I can't really tell.

Dennis: Expedia stopped its merchant-hotel business in Columbus before a court order in mid-September ordered them to pay taxes on the retail rate. But they had bookings in the pipeline [meaning guests would complete their stays after the court order took effect] so Expedia paid taxes on the retail rate for these to comply with the court order.

Not much money is involved, but I think this is the first time that money has changed hands and taxes paid on the retail rate.

Industry Pundit: Interesting. It could get ugly.

Dennis: How could it get uglier? I can see the OTAs withdrawing from Georgia. Period.

Industry Pundit: Texas is next in line. California after that. New York, too. Lots of people [meaning cities and states] with their hands out.

Dennis: Ugly:) And, so much for the OTAs having the momentum (not).

Industry Pundit: But we'll see. I do think they need a new strategy. Juries will see them as just another corporate bad-guy stiffing people like AIG. Not good for lawsuits or sales.

-----

Alas, that was the dialogue. The speculation about the OTAs' next moves on the hotel-tax front continues.

Meanwhile, Robert K. Cole , who is not the Industry Pundit or other industry insider cited above but has some ideas of his own on the subject, believes more OTAs will swap merchant for retails sales as margins get compressed and settlement and legal costs rise.

Thursday, June 18, 2009

At any rate, Expedia.com silently made hotel-merchant model history over the last few months when it remitted taxes on Columbus, Ga., hotel bookings based on the retail rate, which includes taxes and its service fee.

Until now, as online travel agencies fight hotel-tax battles and even win their share of hotel-tax lawsuits across the country, they have been assessed and penalized in some jurisdictions, but no additional tax money is believed to have changed hands as legal appeals were under way.

But, Expedia confirmed to me yesterday that it remitted taxes on the retail rate -- and not merely on the net rate it negotiates with hotels -- in the months since it dropped out of the Columbus, Ga., market so it could comply with a court injunction.

This issue of whether online travel agencies should be taxed on the net rate or the retail rate in merchant-model hotel bookings is at the heart of the tax dispute.

The reason Expedia.com had to remit the taxes on the rate it charges consumers, so it could comply with the court order, is because although consumers pre-pay merchant-model bookings, the hotels invoice Expedia only after the guest stays at the hotel.

This meant that while Expedia stopped selling Columbus, Ga., hotel rooms by mid-September 2008, before a court ordered it to start remitting taxes on the retail rate, the OTA had bookings in the pipeline and travelers staying at the city's hotels after the injunction was issued.

So, Expedia complied with the court order while it was appealing that case to the Georgia Supreme Court. And, earlier this week Expedia lost that appeal in Georgia's highest state court, setting the stage for Columbus, Ga., to dog Expedia for hotel taxes going several years back.

On the Rubicon versus toe-dipping question, I tend to think the latter is in play because the OTAs have indicated they would rather abstain from selling merchant-model hotel rooms in jurisdictions with adverse tax rulings than remit taxes on the higher retail rate. And, on a relative scale, there isn't much tax money involved, perhaps a couple of million dollars at the most, in Expedia's Columbus bookings.

In September, the trial court in the Columbus, Ga., case also ordered Expedia "henceforth" to separately break out hotel taxes and service fees to consumers instead of lumping them together as "taxes and fees" in merchant-model bookings. The court said Expedia.com should detail the taxes and fees either when travelers book on Expedia.com, when they occupy the hotel room, or at both times.

Being transparent about their services fees and therefore their margins is anathema to the OTAs and some of their hotel partners for competitive reasons.

And, this is my problem with the merchant model, as currently practiced. Whether they are legally required to do so or not, the OTAs should spell out to consumers in a transparent manner how much the OTAs charge as a service fee and what the various hotel taxes amount to.

Consumers absolutely have a right to know what they are paying for.

If the OTAs are customer champions, as some claim to be, then hiding behind "taxes and fees" is untenable.

The OTAs have lost recent cases in Columbus, Ga., and Anaheim, Calif., although certainly it is debatable, as Elizabeth B. Herrington, an attorney representing Orbitz, argues, which side has the momentum.

If the OTAs are forced to abandon or severely restrict their merchant-model business, this development would certainly place their business operations under significant stress.

With the recession in full swing, the OTAs already are feeling additional pain because they eliminated booking fees for flights and some have reduced service fees on hotels, as well.

In a new report for PhoCusWright, "Does the Model Work Without Fees?," Jake Fuller details how the OTAs, particularly Orbitz and Travelocity, are experiencing a profit crunch from the fee loss, although waiving fees might enable the OTAs to pick up share from supplier sites.

"Our analysis suggests that OTAs would have to increase ticket volume by 45-90% to fully offset lost fees, and air bookings' share of OTA sales would have to increase from 32% in 2008 to 46-61% (versus the 44% OTA share at the peak in 2002)," Fuller writes.

These pressures are one reason that Expedia is throwing a lot of money into its TripAdvisor advertising/media business, Orbitz is trying to develop a media business and Orbitz and Kayak might be perfect together.

The joke at a recent travel conference was when would Expedia Inc. subsidiary TripAdvisor buy Expedia?

TripAdvisor, which doesn't require proof that the reviewer actually stayed at the hotel, displays the hotel despite questioning the integrity of a portion of the 544 reviews, gives it a rating of 4.5 out of 5, and ranks the property #2 of 102 Honolulu hotels.

Meanwhile, Expedia.com, which requires, an Expedia-booked and completed stay at the property before authorizing a guest review, offers just 35 reviews of Hotel Renew, or just 6.4 percent of the 544 reviews that TripAdvisor offers.

Expedia.com displays no information about whether Hotel Renew allegedly played fast and loose with Expedia.com's review system and rates the property a 4.7 out of 5. Expedia.com has a contractual relationship with Hotel Renew. As an Expedia Special Rate property, Hotel Renew offers Expedia.com a net rate for Expedia.com's merchant-model business.

There could be many totally justifiable reasons that Expedia.com provides no notice about Hotel Renew allegedly gaming the review system, including the possibility that Expedia.com's tighter review requirements headed off any such hanky-panky.

And Expedia Inc.'s Hotels.com, which requires a completed stay prior to review-writing, rates Hotel Renew 4.0 out of 5 and offers just 38 reviews.

And, here's an industry-oriented review of Hotel Renew from Professional Travel Guide, a sister company of Travel Weekly, which I write for.

So, TripAdvisor, with its more loosey-goosey review requirements, gets a depth of content that Expedia.com and Hotels.com would die for.

And, that richer content translates into more advertising revenue for TripAdvisor, which is riding this model for global expansion, because 23 million consumers navigate to TripAdvisor for trip planning -- and often trip-booking through TripAdvisor's advertisers.

The dilemma for TripAdvisor is how to maintain the stickiness of its websites and all of that great content without undermining its integrity to consumers and worth to advertisers. TripAdvisor needs to avoid another controversy like the one that engulfed its subsidiary, Cruise Critic, regarding Royal Caribbean and the Royal Champions.

One option would be to ban the display of hotels that are caught incenting guests or enticing employees to write fraudulent reviews.

And, for consumers, here's a real issue: Would you put more stock in 544 reviews of a property, knowing that some of them are cooked, or would you give more weight to a couple of dozen reviews, knowing that at least the reviewers stayed at the hotel?

I don't think the answer is necessarily a slam dunk for the Expedia.com and Hotels.com model because hoteliers can manipulate this system, too, although not as readily.

It all points again to how complex travel planning and booking are these days: Does an online consumer need to spend all day getting professional advice or reading user-generated hotel reviews of various origins to figure out where to stay?

Sunday, June 14, 2009

Expedia is pushing behavioral advertising and now Travelocity seemingly has ramped up its email and online marketing based on consumers' online-search habits.

In the past 19 days, I've received 13 Travelocity emails alerting me to Baltimore air and/or hotel offers, and when I visit Travelocity.com, I see a big banner ad across the top of the page with the headline, "Baltimore For Less! Newark Departures, Round Trip from $98+ per person."

Am I Baltimore-centric? No, I have never flown into or stayed in Baltimore.

But, I did conduct a lot of searches last month for Baltimore hotels on Travelocity and Priceline (which sent me two emails, as well) when researching a blog piece and stories about Travelocity dropping out of the Baltimore market for merchant-hotel sales because of hotel-tax concerns.

So, it is ironic that Travelocity is pinging me about Baltimore hotel deals although the online travel agency has exited the city's market to a great extent.

It turns out that most -- if not all -- of the hotels in Travelocity's Baltimore hotel emails are outside of the city proper in places like Columbia and Linthicum, Md.

So, the moral of the story from a business standpoint is that Travelocity is getting more aggressive in its email marketing.

And, consumers should be aware that Travelocity is vigorously tracking your search and booking behaviors, giving new meaning to Travelocity's pitch that "You'll Never Roam Alone."

I have no evidence or reason to believe that Travelocity is selling cookie information to third-parties for advertising purposes, as Expedia is doing, but Travelocity indeed is using this data for its own marketing efforts.

The Travelocity emails contain opt-out language for consumers unhappy with being a marketing target, although Travelocity could display this more prominently.

There's one cool thing about both the Travelocity and Priceline promotional emails for Baltimore: They both feature search widgets within the emails.

Perhaps Travelocity, Priceline and other online travel agencies have been doing this for awhile, but I don't recall seeing a search widget as standard equipment in these types of emails before.

Travelzoo's Top 20 deals newsletter, for instance, doesn't contain a search feature, but then again, including such a tool might dilute the worth of links from Travelzoo's advertisers. And, of course, Travelzoo is a deal-publisher and not an OTA.

Saturday, June 13, 2009

After writing my previous post about the issue of hotel-review manipulation on TripAdvisor and the merits or demerits of professional reviews, someone at TripAdvisor reminded me of a fascinating Travel Weekly roundtable discussion that focused on some of the same themes.

Check out this exchange between Arnie Weissmann, Travel Weekly's vice president and editor in chief, who moderated the discussion; Tim Zagat, co-founder of Zagat Surveys; and Arthur Frommer, founder of Frommer's Travel Guides:

"Weissmann: If a consumer sent something to the Zagat Survey that struck you as insightful and authoritative, but was the only person to voice that opinion, would you print it?

Zagat: If the opinion says what other people are saying, or more or less says what people are saying, we will print it. And we like to find opinions that are especially well said.

Weissmann: So if somebody had an observation that struck you as insightful, but they were a minority of one ...

Zagat: We would not print them. We never print a minority of one. But you don't find that. What you find is that there are themes. I mean, these reviews practically write themselves.

The average restaurant in New York has got 1,000 comments on the survey, but the first 100 people say it all, and the others say the same things again and again and again. Pick a restaurant. How many ways can you describe it? Or a hotel?

Frommer: Wasn't it Ibsen who said that the majority is always wrong?

Would you not rather rely on the prognostications or the appraisals by Frank Bruni, the ...

Zagat: No.

Frommer: ... restaurant critic ...

Zagat: No.

Frommer: ... of the New York Times ...

Zagat: No.

Frommer: ... than on 100 New Yorkers ...

Zagat: No.

Frommer: ...who have no ...

Zagat: No, no, I would absolutely not, and I will tell you why. First of all, 100 people who filled out our surveys on a specific restaurant will have gone there an average of 11 times each. That means the restaurant has been visited 1,100 times. Frank Bruni has to write another review next week, so he goes once, twice, three times, maybe four.

Frommer: But Frank Bruni has a basis for comparison.

Zagat: What the hell does he have? A Ph.D in taste buds?"

I love that last quote: "What the hell does he have? A Ph.D in taste buds?"

The answer for consumers -- and to travel businesses -- is that you should probably blend restaurant and hotel reviews from the Frank Brunis of this world with hotel reviews written by guests and restaurant patrons, too.

But, as you can see from the above exchange, people like Frommer, who as a guide-book publisher has a vested interest in promoting professional reviews, have a deep distrust for the opinions of average travelers because Joe and Betty Vacation haven't earned their Ph.Ds in room service or hotel-check-out.

Yes, Mr. Frommer, the majority can be wrong, and solitary and minority opinion can inform.

After all, Joe and Betty Vacation may have an insight that Bruni wouldn't have considered in 5 million years.

@BeatofHawaii kicked off the latest -- what @UpTake characterizes as -- "@TripAdvisor review manipulation kerfuffle," by pointing to TripAdvisor's practice of posting warning notices alongside hotels that allegedly have gamed the hotel-review system.

And BeatofHawaii (Jeff) subsequently clarified his position, tweeting that he values traveler reviews, but "92 fraud badges don't scrape surface of problem. Feels like TripAdvisor wants traffic and reviews at virtually any cost."

We agree that TripAdvisor's reputation and business is at stake when hoteliers muck up the works and encourage fraudulent reviews so I'm sure TripAdvisor will do everything it can to police its hotel reviews.

I like Priceline's approach, which it recently modified.

Priceline stated: "Most hotels now feature a detailed guest scorecard. The scorecard ranks the hotel’s popularity among Priceline hotel guests and shows when a hotel is ranked among the top-rated hotels for a specific city. Also, each hotel receives a guest satisfaction score in 5 different satisfaction categories -- overall quality, cleanliness, staff, location and dining. Unlike other hotel review services that allow anyone to post a review, the priceline.com scorecards are based on surveys that priceline.com hotel guests receive after they’ve completed their stay."

In addition, Priceline took steps to make it easier to enable travelers to search reviews based on their own demographic profile or interest.

Priceline states: "Now, guest hotel reviews can be sorted and grouped according to 7 different traveler types -- solo travelers, groups, seniors, couples, families with teens, families with young children and business travelers. This gives potential hotel guests the ability to search their hotels through the eyes and experiences of like-minded travelers. Priceline.com also offers exclusive hotel and restaurant ratings and reviews from Zagat Survey, LLC."

Any hotel-review system can be manipulated to some extent, and that's especially true, as @RobertKCole pointed out, when it comes to smaller, non-chain properties.

Priceline's policy of limiting hotel reviews to authors who booked their stay on Priceline diminishes the number of potential reviews, but greatly enhances their credibility.

I don't know if TripAdvisor would be able to institute such a policy since it is a research and planning site and doesn't handle bookings.

But, one thing TripAdvisor could and should do immediately is to take the additional step of banning, for a set time frame, the display of hotels that haven't played by the rules and have earned review-manipulation notices.

Then, TripAdvisor, we'd know that you really are serious about the problem.

Friday, June 12, 2009

The blogosphere is abuzz with "news" that TripAdvisor has conceded that some of its user-generated content is cooked.

Arthur Frommer, a longtime critic of guest-written hotel reviews, is at it again on his blog, blasting the concept of user-generated hotel reviews under the headline, "TripAdvisor is now warning you that numerous hotels are submitting phony recommendations for themselves."

This latest round of TripAdvisor-stomping apparently originated with the Beat of Hawaii blog, which found more than 90 hotels with TripAdvisor review-manipulation warning notices and then trumpeted the news of "TripAdvisor's new stand on fraud."

When TripAdvisor catches a property that allegedly games the system, it prominently displays the following notice: "TripAdvisor has reasonable cause to believe that either this property or individuals associated with the property may have attempted to manipulate our popularity index by interfering with the unbiased nature of our reviews. Please take this into consideration when researching your travel plans."

For example, Hotel Renew in Honolulu, rated #2 out of 102 Honolulu properties on TripAdvisor, earned a notice.

And, while Frommer and the Beat of Hawaii dismiss the worth of guest-written reviews, Chris Elliott takes a more reasoned stance, noting that he reads TripAdvisor reviews on the road, "but I do so with the knowledge that the travel industry is successfully manipulating the site. I ignore the best and worst reviews (those are typically the fake ones) and whenever I read phrases like 'best hotel ever' or 'incomparable service' I roll my eyes and wonder about that fabled algorithm that’s supposed to catch counterfeit reviews."

I would disagree with Elliott on the matter of the travel industry "successfully manipulating the site."

With its more than 23 million hotel reviews, I don't think the crush of bogus reviews rises to the level of hotels "successfully manipulating the site," although certainly some of them would want to.

I find tremendous value in guest-written hotel reviews, but read them skeptically.

It's the same approach I take when I read newspaper websites, book reviews, advertisements and, oh yes, professionally written travel reviews.

There is nothing holy about the professionals. And, there often is wisdom in the masses.

There are great hotel-rating services out there, and you should use them in conjunction with guest-written reviews to get a well-rounded picture.

But, "professionals" have their own prejudices because, after all, they are human.

The dirty little secret about getting advice from a travel agent is that they have business relationships with "preferred" suppliers who compensate them especially well because of all the guests that the agents send to the hotels. So some of these agents might steer their clients to a Marriott property instead of a Starwood hotel because Marriott might give the agent a better deal.

Of course, online-travel sites have preferred relationships, too, and many bias their displays.

And, travel agents, like trade journalists, often get discounted rates or free rooms to entice them to visit and say nice things about particular properties.

This is not to say that the professionals are bought off. Hopefully, the vast majority still have integrity.

But, when scoping out a hotel, use your brain, talk to people, and read both professionally written and guest-written reviews. Don't take any of them in isolation.

One of the shortcomings of the TripAdvisor reviews is that TripAdvisor, unlike some other review sites, demands no proof that the reviewer actually stayed at the property.

That could be a tough requirement for TripAdvisor to impose, even if it wanted to, because TripAdvisor doesn't actually book any travel, but funnels consumers off to advertisers for bookings.

TripAdvisor takes fake reviews seriously because, when you take its business model into account, guest-written hotel reviews are its bread-and-butter.

TripAdvisor's advertising/media revenue is contingent on consumers visiting TripAdvisor over and over, and spending some time there, going through all of that content.

When I'm traveling, I consult TripAdvisor's hotel reviews and find them to be a valuable tool, warts and all.

I think the hidden agenda of some of TripAdvisor's critics, like Frommer, is that they consider the democratic empowerment of the consumer and the Web in general to be one big blemish.

Monday, June 8, 2009

Priceline outperformed its online travel agency competitors in the first quarter, but the pressures it is feeling in its hotel business reflect how competitive and dicey the hotel sector is becoming in the current market environment.

Consider that in the first quarter of 2008, 56 percent of Priceline's gross profit came from its international operations, primarily its European-based hotel business, which uses a commission model.

As I wrote in a Travel Weekly article, Expedia, which bought Venere.com last year, is targeting Priceline and its Booking.com hotel business with a commission-based program of its own in Europe, the Middle East and Africa.

That commission model, which both Priceline and Expedia are pursuing at breakneck pace in Europe, has some problems that are absent from the merchant model, which is dominant in the U.S.

The problem?

Consumers easily can cancel the reservations.

In a 10-Q report filed with the SEC May 11, Priceline stated: "As ADRs [Average Daily Rates] decline, customers who have existing reservations may cancel those reservations and rebook at a lower rate, and in times of economic stress, travelers are more likely to cancel their vacation plans outright. While decreasing ADRs and a worldwide recession make it relatively more attractive for consumers to make a cancellable agency reservation than a pre-paid reservation, our agency business will likely have higher cancellation rates compared to companies who offer predominantly merchant model hotel rooms."

If those increased cancellations weren't enough to keep Priceline executives awake at night, then consider the pressures that the merchant model faces in the U.S. over the hotel tax issue.

In the same SEC filing, Priceline detailed the heat it feels from municipal and state auditors around the country.

Priceline stated: "Among others, the City of Philadelphia, Pennsylvania; Miami-Dade County, Florida; the City of Anaheim, California; the City of Phoenix, Arizona; the City of San Francisco, California; the City of Chicago, Illinois; Broward County, Florida and state tax officials from Wisconsin, Pennsylvania, and Texas, have begun formal or informal administrative procedures or stated that they may assert claims against the Company relating to allegedly unpaid state or local hotel occupancy or related taxes. In addition, during the three months ended March 31, 2009, the Company received audit notices from 28 other cities in the state of California. The Company is engaged in audit proceedings in each of those cities."

Priceline added that it expected to be assessed $3.3 million, including penalties and interest, from the City of San Francisco, and may have to pay the assessment in order to appeal it.

And, that sort of "pay to play" policy is not a very appealing prospect for the OTAs.

The expenses, including legal fees, that the OTAs must be shelling out as they battle lawsuits and audits related to merchant-model-hotel taxes must be off the charts.

As I wrote several weeks ago, the OTAs have adopted what I characterized as a Google Earth strategy: They are placing pins on a map, leaving town and opting-out of selling merchant-hotel rooms in cities where they experienced adverse tax rulings.

One industry insider speculated to me that perhaps Expedia's initiative to expand its hotel-commission model in EMEA may be an experiment about or precursor to an abandonment or downplaying of the merchant model, given the tremendous pressures.

At any rate, or model, that is, the hotel business, traditionally an OTA sweet spot, is getting very spicy.

Thursday, June 4, 2009

I'm attending the invitation-only Microsoft Search Summit in Bellevue, Wash., today, and got an inside look at some of the thinking behind the launch of its new Bing search engine.

One headline that I took away from the conference is that Microsoft may be mulling leveraging Farecast's data-mining and predictive-pricing technology for use across major retail categories in Bing.

Another newsy tidbit I discovered is that Microsoft's reported $80-$100 million Bing branding campaign may just be the beginning since there are plans on the drawing board to pour "six to seven times that amount" into Bing advertising over the next three or four years, a Microsoft employee told me.

Regarding a potential initiative on retail-pricing predictions, a couple of Bing officials hinted that something like this might be on the agenda, although I didn't get the feeling that consumers would be able to use Bing to delve into the pricing fluctuations of a Nikon D90 digital camera any time soon.

As I wrote a few days ago about the new Farecast-MSN Travel consolidation into Bing Travel, Farecast, acquired by Microsoft a little more than a year ago, brings tremendous value to the travel-search experience.

For example, Farecast studies historical airfare trends and informs me to "wait" and not buy a $350 LAX-ORD flight on American Airlines because the fare likely will drop.

Farecast has been doing this sort of predicting for several years in the travel sector and has the wherewithal to lead efforts for Bing to get involved in predicting retail pricing across the Bing Shopping vertical.

So imagine if Bing Shopping, which offers consumers a Cashback program, can also implement pricing predictions on major retail items?

That could be a winning combination in terms of providing value to consumers.

Bing Travel General Manager Hugh Crean says a key issue in mining retail categories for pricing trends is whether there are "signaling" data to study.

Another issue, of course, is that many retail items have a short shelf-life so these types of products might be unsuitable targets for examining their pricing trends.

On other issues, there was an under-current of some controversy at the conference concerning the way Bing takes steps at times to keep users glued to Bing.com instead of facilitating their navigation to third-party websites.

David Berkowitz summed up the issue in Advertising Age with his post, "Microsoft's Bing Is a Search Portal, not a Decision Engine."

For example, after conducting a Bing search for a Nikon D90 digital camera, the top result comes in the form of a Bing instant answer, or summary, and when you click on that result, you remain on Bing.com.

Some conference attendees muttered that Microsoft is exercising too much control over the user in stealing traffic from third-party sites without compensating them for their content.

Members of the Bing team, and some conference attendees, countered that third-party sites would probably welcome the Bing exposure, and that this free publicity would drive traffic to their sites nonetheless.

In the travel sector, some suppliers, including American Airlines, have pursued legal actions against companies that scrape their content without permission and sans a partner relationship.

So, maybe we will be hearing more on the "search-portal" front in the future.

Several people whom I respect have approached me -- independently -- in recent weeks with speculation that some sort of combination or merger of Orbitz and Kayak would make sense.

The speculation speaks to the power of travel search.

I say the following only somewhat facetiously, but the travel industry is almost getting to the point where almost nobody will be selling travel anymore -- all of the travel businesses will be building platforms to enable consumers to search for travel instead as part of their ever-growing advertising/media strategies.

Think of Google, which sells huge amounts of travel advertising, but doesn't own a travel business.

Speculation has been rife that Orbitz, the weakest sister among the online travel agencies, is in play. When Expedia eliminated flight-booking fees, taking away a huge chunk of Orbitz's revenue, the prognosticators offered a scenario that perhaps Expedia would buy Orbitz or maybe Travelocity and Orbitz would join forces.

But, the Orbitz-Kayak merger theory posits that Orbitz could build a profitable search business in tandem with Kayak's metasearch platform if Orbitz downplayed its transaction business and leveraged the huge amount of air and hotel searches that consumers already are conducting on its global websites.

For Kayak, a merger of some sort with the larger and search-query-rich Orbitz brand would give Kayak even greater scale, including in markets like the U.K., where Kayak's effort have been sluggish.

I wrote in this blog recently, how Pegasus Solutions found that its system gets 1,900 hits from travel lookers for each booking conversion.

In this regard, travel businesses across the spectrum are trying to grow and monetize their advertising/media platforms as an alternative to their fickle, competition-laden transaction businesses.

From a financial standpoint, I don't know how a Kayak-Orbitz merger would work.

Orbitz, saddled with debt and struggling, has limited options. And, although Kayak acquired SideStep for around $200 million in 2007, an outright purchase of Orbitz would seemingly be cost-prohibitive, given Orbitz's huge debt load.

Still, wiser heads than mine are telling me that the financial folks can figure out a formula for getting an Orbitz-Kayak combination done.

Such a deal would speak volumes about the evolution of the travel business.

Search This Blog

Subscribe via email

Dennis' Tweet Fest

My Tweets

About me

I've followed online travel, its twists, turns and detours, since the beginning (not Adam and Eve, but Rich and Terry), and will follow the aforesaid in this blog. I'm North America editor of Tnooz and I write USA Today's Digital Traveler column. Things not in my resume: I visited Orbitz headquarters pre-launch in 2000 and, left unattended, eavesdropped and examined the whiteboards to learn partnership details; Travelocity's ex-CEO Michelle Peluso credits me with her success (Wharton notwithstanding) after I wrote a sentence (with accompanying photo) mentioning that some of her Site59 women wore fishnet stockings and then airline execs kept the phone lines busy; I once drove to tiny Sherman, Conn., to see where PhoCusWright lives; and I was a nachtportier in a West Berlin hotel in the days (Btw) when a nasty wall split the city. Fyi, the previous stuff wasn't necessarily in chronological order.

My Diss-claimer

The opinions I express in the Dennis Schaal Blog are my own. Only I could think of this stuff. The opinions uttered or written here in no way reflect on the views of past employers, current partners, future associations (how could they anyway?) or my first-grade teacher, Mrs. Slayton. I don't have a lawyer, but if I had one, he or she probably would have told me to write something like this. Well, maybe not exactly. The Dennis Schaal Blog is Copyright (c) 2009 by Dennis Schaal. All rights reserved.